Answer to Question #127825 in Macroeconomics for Womba Nambeye

Question

5. (a) Muchuu’s mortgage was approved by Zambia National Building Society. Muchuu however, decided to purchase a model of a car called Bugatti using the mortgage. On the other hand, Muchuu had initial plans of investing money in some risky online business. He therefore, approached a money lending institution and applied for a loan in the name of exporting goats to Democratic Republic of Congo and his loan was also approved for such a lucrative investment by the lending institution. Discuss the above scenario and make relevant comparisons and distinctions.

(b) Use Qd = 300 – 50P, and Qs = -100 + 150P to calculate, (i) equilibrium price (P*) and quantity (Q*), (ii) point elasticity of demand and supply at P* and Q*, (ii) Consumer and Producer Surplus

Answer 1

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